Suppose that some people are counted as unemployed when, to maintain unemployment compensation, they search for work only at places where they are unlikely to be hired. If these individuals were counted as out of the labour force instead of as unemployed, how would the labour statistics change?
A) The unemployment rate and the labour-force participation rate would be higher.
B) The unemployment rate and the labour-force participation rate would be lower.
C) The unemployment rate would be lower, and the labour-force participation rate would be higher.
D) The unemployment rate would be higher, and the labour-force participation rate would be lower.

Question

Quizplus · Accepted Answer

If individuals who are currently counted as unemployed but are actually not seriously seeking employment are instead counted as out of the labour force, then the number of unemployed individuals will decrease, resulting in a lower unemployment rate. Additionally, because these individuals are not actually seeking employment, their inclusion in the labour force artificially inflates the labour-force participation rate. Therefore, if they are counted as out of the labour force instead, the labour-force participation rate will decrease as well.

Suppose That Some People Are Counted as Unemployed When, to Maintain